Growing pains or the death knell for multimedia industry group?

Less than a year after the First Cities initiative was made public (see Vol. 2, No. 7, p. 3), rumors have begun to fly that the multimedia industry consortium is dead in the water and will quietly disband at the end of this month.

According to the Microelectronics and Computer Technology Corp. (MCC), the Austin, TX-based R&D cooperative that organized the First Cities project, those rumors are false. “The consortium has made some changes but is progressing toward Phase II [developing site trials],” says Brian Kushner, MCC’s vice president and executive director of information systems and vice president of corporate development. “There is no truth to the rumor that First Cities is shutting down.”

CONSORTIUM ENCOUNTERS SETBACKS

While members of MCC are adamant that the First Cities project is alive and well, we would not exactly say it is thriving. Since Digital Media last covered the consortium, it has experienced some setbacks.

To begin with, First Cities has been unable to attract “marquee” names from the cable and content industries as it expected it would earlier this year. In fact, the consortium, which expected “lots and lots of companies” to participate in Phase II, is down several members from Phase I.

Lacking content, conduit. According to Kushner, of the 13 members we identified, only Bellcore and Comsat have officially announced their intention to participate in Phase II, which involves a greater financial contribution and participation in actual site development.

Kaleida Labs has signed a letter of intent, but charter members including Apple, Kodak, Tandem, Corning, Bieber-Taki, North American Philips, Sutter Bay, Southwestern Bell and US West have not officially stated their intentions. (Off the record, several of these companies confirmed that they would not be participating.)

In addition to charter members Bellcore and Comsat, which are Level I participants, the group has added five “associates” including Hughes Broadband Technologies and several universities. (An associate in the First Cities consortium makes a smaller investment and in turn receives slightly lesser benefits.) According to Kushner, First Cities has letters of intent from several cable and telephony companies.

These telecom companies as well as media companies that can supply entertainment programming and content are critical to the success of First Cities since the group does not own either content or conduit.

AT&T kept from joining. According to Dennis Bieber of Bieber-Taki, a “boutique venture capital company,” which is currently not involved in the consortium’s activities, it was veto power inside the group, not lack of interest from powerful companies on the outside, that prevented some of the major players in these industries from joining First Cities.

“If there were no veto powers,” Bieber says, “it would have been a vibrant consortium. I sponsored AT&T and was very disappointed when they were not permitted to participate.” Bieber explained that two members within the group vetoed AT&T’s involvement. AT&T then signed an agreement to participate in the Castro Valley trial with Viacom.

HAS ‘ALLIANCE FEVER’ MADE FIRST CITIES OBSOLETE?

Ironically, it is exactly these types of alliances that have prevented the consortium from getting off the ground, according to another individual who has been involved in the First Cities project.

“The whole idea of First Cities has been made obsolete by all of the large companies that are independently creating test beds using their own money and resources,” says the individual who spoke under the condition of anonymity. “Bell Atlantic is doing 50,000 homes in New Jersey; AT&T is working in Castro Valley; Time Warner, in Orlando. These were the types of things that were supposed to happen through First Cities.”

Ultimately, he believes the group suffers from the same problem many consortiums suffer from. “When you bring representatives from all these disparate groups together, you are bound to experience conflict based on different cultures, different agendas, different understanding of the goals and purposes.”

SIDRAN TO LEAVE FIRST CITIES PROJECT

In addition to the loss of several important potential corporate sponsors, First Cities is also about to lose Bruce Sidran, the project’s executive director. According to MCC’s Kushner, Sidran will be leaving the multimedia industry consortium at the end of this month and returning to Bellcore. (Why Sidran is leaving remains an unanswered question. He was unavailable for comment despite our repeated attempts to reach him.)

A new leader. The First Cities project has not been left without someone at the helm, however. Tom Reiman, formerly executive vice president of Sutter Bay Associates, has taken the lead position at First Cities.

“Tom has the charter and the mantle to lead First Cities,” says Kushner. “He will assume Bruce’s position.” Already Reiman, who has a background in telecom and real estate, has taken on the role of site development director, aggressively working to move the First Cities project into Phase II. His goal is to establish at least two trial sites (one based on a cable infrastructure and the other on a telco delivery system) by the end of this year.

“Originally First Cities’ charter was to go out to identify members, identify sites and develop architecture,” says Kushner. “The change is that we plan to focus on specific sites.”

To date, First Cities has held meetings in three sites, according to MCC. They include Albuquerque, NM; Omaha, NE; and Des Moines, IA. None of these sites has agreed to participate yet. A fourth site in Rochester, NY, is under review. In addition, the group has been contacted by several sites that are interested in working with the consortium, according to Reiman.

A state of limbo. At this point, however, the First Cities project is in a kind of limbo between Phase I and Phase II; it does not have the luxury of time or finances to remain in the “deep think” portion of Phase I and it lacks the types of corporate sponsors necessary to fully develop the technology for a trial city.

Getting the locals involved. In order to move the project into Phase II, Reiman and MCC have modified the charter of First Cities to include a more hands-on approach by the local government, media companies, cable operators and telephone service providers at the actual trial site.

Reiman believes that in order to move forward, the group will not only need a commitment from one of these cities, but will also require substantial financial investments and community support. “We are trying to emphasize the grass roots, local ownership of these sites,” says Reiman. “We feel it is critical to our success.” He added that “the capitalization of each site will be customized for each site.”

It is Reiman’s goal to announce two trial sites by the end of this year. And we believe it is essential to the group’s survival that First Cities meet this goal.

As several individuals involved in the consortium pointed out, the large media and telecom providers are not waiting around for any industry consortium to set standards on how to deliver interactive media into the home. They want to do it themselves and force a standard, which is not necessarily in the best interest of all of the disparate groups that want to be involved in delivering interactive media to the consumer.

It is important, then, that we encourage projects like First Cities that are attempting to provide open standards and interoperability. Despite its setbacks, First Cities is still a good idea that deserves the attention and support of the various players in the convergence industries. As Reiman says, “Our success definitely depends on this industry believing in our concept and supporting us.”

Janice Maloney